How are social media influencers taxed abroad?

As social media continues to grow in popularity, influencer marketing has become a new tool for reaching out to consumers. Brands are now using social media influencers to advertise their products and reach out to a wider audience and gain more followers.

These social media influencers are individuals who have gained a large number of followers on different social media platforms for one reason or another.

Brands may reach out to you as an influencer and offer you monetary compensation or free products in exchange for posting photos or videos that feature and promote their product.

However, as you earn money from your sponsorships, endorsements, and other social media income, your earnings are subject to income tax.

If you’re thinking about taking up this career path and becoming a social media influencer or you’re already one, then it is important for you to understand how your taxes will be affected by being one. Read on to learn more.

Is your income tax paid domestically or abroad?

The answer to this question depends on the country in which the you live. Each country has different tax laws, so it's important to research the tax code of the country in question (or speak to a specialist tax accountant like Capture that can help).

If you're an influencer who is paid sponsorships, endorsements, and other social media income deals, it's important for you to know where you are liable to pay tax. Because depending on your location, you may be subject to pay tax in the country you're spending most time in.

Sometimes if you're paid from overseas, tax is deducted at source. You might be able to reclaim this if you're not a resident of that country - it all depends on complicated things like double tax treaties between countries. There are a few things to keep in mind if you're an influencer who receives their income from abroad.

For example, if you live in the United States, you are required by the income tax act to pay income tax to the IRS (Internal Revenue Service). However, if you live outside of the US, you may or may not be required to pay taxes to your home country, depending on that country's tax laws.

This is why it’s important to know the tax laws of both your home country and the country you reside in so that you can ensure you are complying with all the necessary regulations.

Failure to do so could result in penalties, including, interests, fines or even imprisonment. If you're not sure whether your income tax is paid domestically or abroad, be sure to speak with a tax professional.

What tax implications are there?

The tax implications that exist for social media influencers will depend on the country in which they reside and the country from which they’re paid. This is why I said that it is important to be aware of the tax laws in both your home country and the country in which payment is made so that you can comply with both sets of tax laws.

Let me give examples of some tax implications so that you will best understand what I mean:

For example, if an influencer earns income from sponsorships and endorsements while living in Dubai, the income may be subject to income tax in Dubai. However, if the influencer moves to Bali and continues to earn income from the same sponsorships and endorsements, the income may be subject to income tax in Bali.

If you're a US citizen and you're paid by a sponsor in Dubai for a post on your Instagram account, you may be subject to income tax in both the US and Dubai. Similarly, if you're paid by a sponsor in Bali for a post on your blog, you may be subject to income tax in both your home country and Bali.

It all depends on where you are deemed to be 'resident' for tax purposes and sometimes that can be in two countries at the same time. In that case we need to refer to the double taxation treaty that may exist between the two countries to see who gets 'taxing rights' on you. Who said tax was easy!